By Mike Krabbe, Vice President, Sales at enVista
Most companies understand the importance of having a supply chain strategy, but few have a plan to execute it effectively. Creating a strategy is the first step, but aligning teams and departments, acquiring resources, securing budgetary space and implementing the technology determine the success of your supply chains.
A well-structured business plan connects vision to action, ensuring your goals translate into measurable outcomes. enVista can help you define, implement and measure the success of your supply chain strategy.
Reasons to Build the Business Case
As companies continue to develop internal supply chain modelling expertise, understanding the costs, impacts, timing and benefits of each key business decision is crucial to approval of the execution of the analysis.
Many Fortune 1000 companies maintain supply chain modelling teams to build and maintain a supply chain model and run scenarios. Unfortunately, those teams often struggle to persuade management to act on the information gleaned from their models. A strong business case bridges the gap between strategic intent and practical execution. It quantifies potential benefits, identifies resource needs and sets a clear roadmap for transformation.
Without a business case and the ability to measure the ROI of your efforts, even the most effective supply chain strategy risks being deprioritised or underfunded. Leadership buy-in helps ensure your supply chain strategy is executed effectively and receives the required ongoing investment to maintain it.
To achieve buy-in, supply chain modelling teams must go beyond building basic models. Building a holistic view of the supply chain and demonstrating how it links up with long-term business objectives is essential. Without that knowledge, persuading leadership to make substantial changes to the supply chain can be difficult.
The company must also begin making critical business decisions, such as determining whether new distribution centres (DC) and transportation should be insourced or outsourced. Should the company maintain a private fleet or dedicated fleet, and should it outsource all distribution, some of its distribution or maintain all operations in-house?
These decisions have significant impacts on supply chain strategy and cost structures. Unfortunately, many companies don’t fully understand the impacts, costs and benefits of each.
When to Build the Business Case
Considering the business case helps leaders make data-driven decisions. The ideal time to build a supply chain business case is before launching any significant operational change, such as:
- Before launching a new technology implementation
- During an M&A integration
- Before a network redesign
- If performance metrics plateau
- In response to poor/declining performance
- When supply chain risk or cost volatility increases due to world events
Building early alignment ensures initiatives are backed by data, driven by ROI and supported across the organisation. Being proactive and building a business case before making significant changes helps prevent organisations from falling into the trap of being reactive and reduces the likelihood of adverse outcomes.
How to Build the Business Case
Building a business case requires both data and vision. The goal is to connect the supply chain goals to quantifiable business outcomes. A successful business case quantifies the “why,” clarifies the “how,” and secures the “who”, creating alignment across the enterprise.
To build a business case:
- Define your objectives. Consider your business objectives and how supply chain improvements can help the organisation achieve them. Assess your current performance and identify areas of inefficiency or poor performance. Set KPIs to monitor them over the long term.
- Quantify the benefits. Using that data, calculate project cost savings, improvements to customer service, risk reduction and other benefits your team can use to achieve leadership buy-in.
- Identify enablers. Determine which teams, technologies and processes must be brought on board to ensure the project’s success.
- Model scenarios. Build simulations to calculate potential outcomes and justify investment in the project.
- Earn stakeholder alignment. Demonstrate the project’s benefits for each department to earn stakeholder buy-in.
The consultants at enVista can help you navigate this process with proven frameworks for supply chain strategy design, change management and implementation.
As you run scenarios for each potential supply chain network, you’ll need to follow four steps to build the business case for the future state network. Each must be measured quantitatively and qualitatively to determine the total benefit or drawback of the changes.
1. Benefits
The first step is understanding the benefits of the new network. Begin by assessing the current performance of the supply chain and identifying weak KPIs or potential areas for improvement.
This information can help determine benefits such as improved SLAs, reduced labour costs (rate and/or quantity), reduced transportation costs, reduced inventory, easier management or added synergies between departments.
2. Risk/Sensitivity Analysis
Assessing the risk of the changes is also key to ensuring the benefits outweigh the potential downsides. Starting up a new distribution centre, insourced or outsourced, has risks. You mut also consider whether there’s enough sustainable labour in the new market.
There is also a need to conduct a sensitivity analysis. Business changes – labour rates and availability, taxes, product lines and the economy – are all quantitative adjustments that need to be factored into a model to determine the potential impacts and value of the new network.
3. Investment
You also need to consider the cost of the transition and network changes. If a distribution centre relocation is involved, the company needs to understand its true shutdown and startup costs.
This includes developing a transition plan for fulfiling inventory between the shutdowns and keeping DCs running instead of finding an alternative fulfilment method, etc. They must also consider the means to move inventory as well as any racking and automation. These details are often overlooked and not considered in the total cost of a model.
4. Timing and Responsibility
The final step in developing the supply chain business plan is understanding the sequence of events of the transition from the current state network to the future state. Developing a logical and practical step-by-step methodology to deliver an efficient transition to the new network is the only way to successfully and smoothly migrate to the future state.
After developing the stepwise plan, you’ll need to determine who will be responsible for each portion and how everyone will work together to achieve the future state network. Individuals must understand their responsibilities and how their roles contribute to the success of the project.
Maximizing Results
Developing a business plan is the first step, but it’s not set in stone. It’s a living, breathing thing that must evolve to ensure success.
Measure execution through data-driven KPIs that validate assumptions, quantify ROI and reveal new optimisation opportunities. Organisations that treat their business case as a dynamic, evolving tool consistently outperform those that see it as a one-time exercise.
To maximise results, leaders must utilise ongoing KPI tracking. Performance dashboards can provide an at-a-glance overview of the project’s outcomes.
Continuous alignment between departments is vital. Understanding individual roles and intricacies creates a sense of community toward a common goal. It also creates accountability for each person and helps teams make better business decisions on a broader scale.
Agile frameworks can help teams and the entire organisation review performance, analyse outcomes and make better decisions. They provide a complete understanding of the business and how each network adjustment will impact total cost, SLAs, inventory levels, capacity and transportation operations.
How enVista Can Help
To maintain a competitive advantage, it’s crucial to optimise your supply chain to service your customers. enVista’s supply chain network analysis team is led by experts with an operations background. Our proven methodology helps organisations move from strategic planning to measurable results.
enVista offers supply chain strategy, business case modelling and execution support. We have experience supporting omnichannel supply chains across numerous industries. We work side-by-side with the modelling team to run each necessary scenario and deliver data-driven insights based on advanced analytics. Our project teams develop a complete implementation timeline and RACI matrix to ensure implementation and maximum buy-in.
enVista’s complementary services can help maximise ROI. Our expertise in labour management, transportation consulting, supply chain systems and DC design and automation allows for real-time rates in each area. These live rates are put into the model to help you better understand the trade-offs between cost and service levels.
By combining business case development, network design and execution alignment, we ensure your supply chain strategy drives sustainable value — not just theoretical outcomes.
Plan with purpose. Execute with precision.
Contact us today to learn more about how we can help you turn your supply chain strategy into improved performance.
